Price Action Trading - It works and I love it...
For those of you who follow my price action trading YouTube channel or my Forex price action website, you will know that I am big on price action trading. I love it and it works - a great combination :-)
Price action shows a Forex trader where price has been in the past and where it could be in the future. It consists of analysing price charts, identifying areas of market support and resistance, identifying price consolidations, market trends and recognising patterns formed by price. In one of my favourite trading books (Reminiscences of a Stock Operator), Jesse Livermore states 'I learned early that there is nothing new in Wall Street...Whatever happens in the stock market today has happened before and will happen again'. This is the principle used in price action trading - what has happened in the past will likely happen again.
Perhaps it is the Forex geek in me but price action has appealed to me from the beginning. I love seeing support and resistance respected and clear patterns that hold and signal big moves - probably because it builds my confidence in price action trading and my belief that it is a great way to predict the market.
Even though I am a price action convert and use it religiously to trade Forex, I have never been tempted to debate my beliefs or to shoot other types of traders down. But there are certain questions that I would like to pose and then answer; is price action the only way to make money when trading Forex? Do indicators work? Is fundamental analysis reliable?
Is price action the only way to make money when trading Forex?
The answer is obviously no. Price action is not the only way to trade Forex successfully. There are plenty of Forex traders that make a profitable return each year that are not price action traders. Saying this though, I have yet to meet a trader that does not use an element of price action as part of their Forex trading strategy. Even traders that rely heavily on fundamental analysis, usually use some form of price action analysis to enter or exit trades.
Price action may be the only way that you (as an individual) can trade profitably though. We all have our own trading beliefs and personalities. Price action trading may be the "holy grail" for one trader but not for another. The same could be said for fundamental analysis and for using technical indicators.
Do technical indicators work?
In short... Yes! From my experience, trading with indicators can be beneficial. But there is a big difference between trading technical indicators as a confirmation of price action and trading solely indicators. For example, an RSI signal is a great confirmation that price may start retracing, but it should never be the only reason to buy or sell a particular currency. Relying on solely indicators will lead to Forex failure. The same could be said for aspects of price action trading - price being at support is never a good enough reason to go long, but recognising that price is at support can be a great part of analysis.
How about fundamental analysis?
Same answer as above.
How price action trading has helped me
I have been a Forex trader since 2012. All of my Forex trading strategies are based on price action. I have seen my trading accounts grow using price action strategies - I am a true price action convert.
Price action helps me to know which direction I should be looking to trade, where to enter a position and where to exit a position.
I recently started a trading account that pushes my price action strategies to the limit (I am currently up by over 30% in just 6 weeks). You can follow the account on Forex Factory and myfxbook. The strategies and techniques used for this account are covered in my price action trading course.
You can learn more about me and about price action trading by following the links below...